By Daniel Lanyon on Tuesday 7 March 2017
The largest UK fund focused on the online lending market is wooing investors after worse than expected performance by permanently cutting some charges.
Star fund manager Neil Woodford has increased his holdings in the £825m P2P Global investments trust, according to regulatory filing,s to reach 12 per cent of the total issuance of its shares.
Woodford, who manages the £9.8bn CF Woodford Equity Income fund, has backed the investment trust since its launch in May 2014. Along with his former colleague at Invesco Perpetual Mark Barnett, he was one of its largest and most prominent investors. Woodford is also planning a new fund, yet to launch, which will target a higher level of income.
The performance of P2P GI over this near three-year period has been testing for investors with the share price re-rating downward and the monthly gains in its Net Asset Value – while positive - not in line with expectations of its run rate.
MW Eaglewood Europe, the investment manager of the closed end fund, has been systematically buying back shares to close the double-digit discount that has appeared in the past year or so as a result of market scepticism. Now, it has also said it will reduce its fees further after already cutting them back in 2016.
MW Eaglewood, has permanently waived the management fee charged on leverage from 1 January 2017. At launch in May 2014 the fund had base management fees of 1 per cent on gross assets, but in July 2016 it reduced the fees to 1per cent on net assets and 0.5 per cent on leveraged assets. From 1 January, fees are now 1 per cent on net assets. The performance fee of 15 per cent of NAV total returns remains in place.
Although returns have been consistently positive, they remain below the intended rate of return, as shown in graph below (right).
The January NAV has just been released. It is up 0.24 per cent on a total return basis for the month. The NAV growth was negatively impacted by: 0.08 per cent from the revaluation of equity positions, 0.09 per cent one-off costs from the sale of a non-core portfolio of US consumer loans and 0.05 per cent due to FX hedging as a result of Brexit induced currency swings.
According to AltFi Data’s number crunching, the trust has performed in line with the broader UK marketplace since its inception – as measured by the AltFi Data Marketplace Lending Returns Index. It’s total return, which includes its share price movement, is shown in the orange line and demonstrates its overall weakness for investors.
Analysts at Numis Securities says MW EagleWood is also continuing to actively transition a portion of the book away from the US consumer segment.
“The decrease in the base management fees is welcome, and we believe that it reflects shareholder pressure in the face of disappointing NAV returns,” they said.
“We still believe that the fee drag on P2P GI remains high due to the performance fee of 15 per cent on NAV total returns. We believe the fee would be more balanced between the interests of investors/manager if a performance hurdle was introduced with the fee only accruing for performance above a specified NAV total return (of at least 6 per cent pa),” they added.
MW Eaglewood said in a recent statement: “The Investment Manager is dissatisfied with the net returns achieved by the trust and is currently undertaking a review of additional steps that might be taken to improve results.”